Is the Life Insurance Industry Really Losing Relevance?

Death…It Isn’t What It Used To Be

As the life insurance industry reaches its 50-year record low for life insurance ownership in the U.S. (LIMRA 2010) and companies continue to struggle with how to reach the underserved middle market, one can’t be shocked at why the government is so hell-bent on taxing the cash value. Nobody’s talking about death these days.

A recent article in the Pittsburgh Tribune-Review took this statistic and shoved something in our faces. The consumer would rather go without life insurance than other “necessities.” Some experts in that article are suggesting that the point is limiting risk to survivors. If your spouse has a degree and can work, the risk of destitution is far less than it was in the past when women were barefoot, pregnant and without Facebook.

While this could certainly play a role in the decline, I also think other factors are at play here. Not only is the consequence of the death of a breadwinner gentler than it used to be, the likelihood is also less. And that’s not just actuarial cocktail party talk—the average consumer knows it too.

Let’s look at a few facts. According to the National Center for Health Statistics, life expectancy in 1930 was 59.7, and in 2007 it was 77.8. In the early 1900s, the risk of influenza and tuberculosis was significant. Today it is near zero. Workplace fatalities were more commonplace due to the lack of safety standards. Today it is far less. And the incidence of death in the four years it took to fight World War II was quadruple that of the 12 wars fought in the 50 years hence.

So Death Is Not Exactly Top Of Mind Anymore

And life insurance sits squarely in the box we call a “crisis category.” The consumer is barely involved with the product, and when he/she is, it is a stinky experience.

But does that mean that life insurance should be irrelevant? I don’t think so. It is irresponsible to consider self-insuring a risk that can be hedged with pennies on the dollar. I don’t care what Texas Tech’s Center for Financial Responsibility says about it.

But there is a message in here. The consumer is looking for “lifestyle continuity,” not life insurance. Just like when they buy a drill bit. They are not looking for a drill bit, they are looking for a hole.

This is classic myopia that almost put the movie industry, the railroads and dry cleaners out of business. Redefining the business you are in and innovating around that definition is the key. And in the case of a crisis category, improving the emotion and involvement level of your product would make someone less likely to choose unlimited text messaging over their life insurance as a monthly expense.

So if you were trying to improve involvement and emotion, and recognize that death is not top of mind, what would you do? Where would you start? How about with the consumer?